Sinodinos was warned over ‘dishonest’ AWH

Dr Kerry Schott, the former head of Sydney Water, who tried to get to the bottom of why the costs that AWH charged to Sydney Water ballooned out.
Photo: Sasha Woolley

by
Geoff Winestock andNeil Chenoweth

Former assistant treasurer Arthur Sinodinos was warned by one of NSW’s most respected public servants in late 2010 to be careful about “dishonesty" and unjustified expenses at his company Australian Water Holdings.

Kerry Schott, then managing director of Sydney Water, said on Monday she told Senator Sinodinos “he might be careful with the company he was keeping" at AWH. “We thought they might be dishonest."

Former NSW premier
Nathan Rees
referred to AWH as “a bunch of crooks" who were always going behind the backs of public servants to complain to politicians, Dr Schott said

Dr Schott was speaking at a NSW Independent Commission Against Corruption (ICAC) hearing into allegations of corruption in obtaining a water contract for AWH.

ICAC has heard that AWH ran up huge expenses including donations to the Liberal Party of $96,000 and payments to lobbyists and for entertainment. These payments were then billed to Sydney Water under a contract to supply water and sewage to the north-west of Sydney.

Senator Sinodinos, who stepped aside as assistant treasurer last week pending the outcome of the ICAC hearings, told Parliament last year the AWH board knew nothing about individual donations to the Liberal Party even though he was state treasurer of the party at the time.

Dr Schott, who resigned from Sydney Water in 2011 and was appointed by Premier Barry O’Farrell to head a committee of audit into the state’s finances, told ICAC the meeting with Senator Sinodinos took place at Sydney Water’s offices in late 2010, after the senator was appointed chairman of AWH, on November 3 .

She did not list specific expenses but told him that expenses had risen too much in aggregate terms without explanation. She said expenses had jumped from $200,00 to $600,000 a month.

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Dr Schott said that after the meeting with Senator Sinodinos, some of AWH’s expense claims were reduced.

Documents filed by ICAC show that by December 23, 2010, AWH chief executive Nick Di Girolamo was proposing that Senator Sinodinos as chairman be granted a 5 per cent shareholding in AWH p lus a further 2.5 per cent success fee, which ICAC counsel Geoffrey Watson, SC, said could have been worth up to $20 million.

Dr Schott was in a long-running battle with AWH over the excessive expense claims and over AWH’s request for a much bigger public private partnership contract.

Dr Schott was asked at ICAC about threats of legal action made against her by Mr Di Girolamo and described their relationship as “fraught".

The inquiry is looking at a false allegation of corruption involving the firm Veolia made against Dr Schott to ICAC in 2010. Around the time of the accusation, NSW Labor MP Eddie Obeid, whose family had a $3 million investment in AWH, had told the water minister Phillip Costa to “sack the bitch," referring to Dr Schott.

When Mr Costa refused he was told by Mr Obeid that a corruption allegation would be made to ICAC against Dr Schott and that this would emanate from the office of Liberal Party frontbencher Chris Hartcher.

Anonymous corruption allegations were made but evidence at the ICAC inquiry has linked them to Tim Koelma, a staffer of Mr Hartcher who went on to become Liberal energy minister in the O’Farrell government.

AWH made payments totalling $183,000 to a trust called EightByFive linked to Mr Koelma.

Dr Schott told ICAC any accusations of corruption were false and she assumed that if an accusation had been made against her “it stemmed from Australian Water, who were running out of money and could not pay their bills because they could not corroborate their expenses".

Dr Schott wrote to AWH in July 2009 saying that without explanations of where the costs AWH was claiming had come from, “paying the expenses would breach my duties as a director".

Dr Schott said she did not know what Mr Rees, who was then water minister, thought of AWH “but he used to refer to them as a bunch of crooks".

Earlier, the current chairman of AWH, Peter Canaway of Perth engineering group BG&E, said his company had bought out Mr Di Girolamo’s 50 per cent stake in AWH in April 2013 for $250,000.

A year earlier BG&E had provided a $5 million convertible loan to AWH on the basis that the company was worth $50 million.